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When Are Preferences Consistent? The Effects of Task Familiarity and Contextual Cues on Revealed and Stated Preferences

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  • Felix Schlaepfer

    ()
    (Socioeconomic Institute, University of Zurich)

  • Baruch Fischhoff

    ()
    (Department of Social and Decision Sciences, Department of Engineering and Public Policy, Carnegie Mellon University)

Abstract

Traditionally, economists make a sharp distinction between stated and revealed preferences, viewing the latter as more fully meeting the assumptions of economic analysis. Here, we consider one form of empirical evidence regarding this belief: the consistency of choices in stated and revealed preference tasks. We show that both kinds of task can produce consistent choices, suggesting that both can measure underlying preferences, if necessary conditions are met. We propose that a necessary condition is that task be either familiar to those facing it or offer contextual cues that substitute for familiarity, such as prices in competitive markets or recommendations from trusted, knowledgeable sources. We show that how well decision makers achieve such understanding is often confounded with the method that researchers use. Considering task familiarity not only clarifies some of the conflicting evidence regarding revealed and stated preference methods, but raises potentially productive questions regarding the roles of social institutions in shaping preferences.

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File URL: http://www.soi.uzh.ch/research/wp/2010/wp1007.pdf
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Bibliographic Info

Paper provided by Socioeconomic Institute - University of Zurich in its series SOI - Working Papers with number 1007.

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Length: 20 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:soz:wpaper:1007

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Keywords: Consistency; contingent valuation; framing; public goods; revealed preferences; stated preferences; validity;

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  1. Schlapfer, Felix & Schmitt, Marcel, 2007. "Anchors, endorsements, and preferences: A field experiment," Resource and Energy Economics, Elsevier, vol. 29(3), pages 229-243, September.
  2. Schläpfer, Felix & Schmitt, Marcel & Roschewitz, Anna, 2008. "Competitive politics, simplified heuristics, and preferences for public goods," Ecological Economics, Elsevier, vol. 65(3), pages 574-589, April.
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